There Goes the Neighborhood: Does Tipping Behavior exist among Income Groups?.

Abstract: The segregation models of Schelling (1969) stand as a cornerstone for understanding how people arrange themselves in space and how such arrangements can be inherently unstable. Extensions of such `tipping' models concerning race have been the subject of much empirical testing, most notably in Card, Mas and Rothstein (2008). However, little attention has been paid to whether or not simila... read morer unstable spatial arrangements occur between income groups when considered separately from race. I propose a model in which social interaction effects lead to lower income groups causing tipping behavior amongst higher income groups. Using US census data normalized to the tract level from 1970-2000, I uncover compelling evidence for tipping behavior amongst income groups. It is particularly strong for people below/above the 25th percentile of income where tipping points range between 10 and 35 percent. When the proportion of people below the 25th percentile in a neighborhood becomes larger than said tipping point I estimate that the expected decrease in those above the 25th percentile in the neighborhood will be between 10 and 25 percent. Such estimates are robust to the possibilities of these simply being racial tipping points misinterpreted as tipping points for income groups and of the tipping point's fuzzy nature (non-linear relationships being interpreted as discontinuities). read less